Customer Segmentation: Analysis, Models & Examples

"For example, collectors focus on card rarity, parents want the coolest cards and best offers for their kids, and enthusiasts are looking for what they can't get anywhere else." The key difference between the two is that market segmentation divides the entire market, whereas customer segmentation only divides a brand's existing customer base. Start your free trial with Shopify today—then use these resources to guide you through every step of the process. The Bain study noted that identifying the sweet spot of customer segmentation is “only half of the growth equation.” The next essential step for every company planning to act on market segmentation is to take an “unflinching inventory” of internal capabilities—both strengths and weaknesses.

In a differentiated approach, the firm targets one or more market segments and develops separate offers for each segment. Market segmentation assumes that different market segments require different marketing programs – that is, different offers, prices, promotions, distribution, or some combination of marketing variables. For example, Sephora offers a community for BeautyINSIDER members. Sephora offers unique benefits for highly engaged customers. For those customers, your Q4 messaging could amp up holiday deals and offers. Join millions of Customer segmentation self-starters in getting business resources, tips, and inspiring stories in your inbox.

Whether it’s at a brand level or for a smaller marketing strategy, you need to understand each customer base’s wants and needs in order to target them most effectively. Customer segmentation is popular because it helps you identify new products and services to create next, as well as how to market and sell existing offerings more effectively. You’ll see a better payoff by targeting one or two focused customer segments rather than trying to attract the whole market with a broader, shotgun approach.

Customer segmentation is the process of separating an audience into groups of buyers based on similar characteristics and preferences. However, powerful as these customer segmentation tools are, newer companies without substantial customer data may need to find a more pragmatic starting point. And it’s important to constantly review and re-measure segments to not only adjust to those changes, but even anticipate them. A customer value matrix can be particularly helpful with defining these priorities, especially for smaller retail and service businesses taking the first steps into customer segmentation, as researchers have pointed out.

Grow your brand by targeting the right people at the right time

It goes without saying that by segmenting your B2B target market, you’re more likely to reach those who need your product or service. Our research found that there are now an average of four buyers in the decision-making process, with 11% of companies having more than ten people! To extend that customer lifetime value and loyalty, it’s important to keep nurturing the relationship. At this point, your content should aim to reach all decision-makers in the buying process. Focus on educational content that positions you as an expert, addresses their pain points and introduces your solutions. Segmenting accounts by where they sit in the sales funnel can help businesses tailor content that can nurture leads and help close more deals.

What are GTM segmentation steps?

You might even consider building a mobile app tailored toward these customers. If you’re marketing to a global audience, understanding the preferred language of your customers can be extremely helpful. For a fast overview of your customer base, you could start by looking at the gender of your customers. This is especially true if they don’t share these details with you directly—which can be particularly useful if you are trying to target them with specific offers or services. Each model below offers a unique lens through which you can understand and engage with your customers.

What tools are needed for B2B SaaS customer segmentation?

For instance, if you sell summer clothing, you might focus advertising in warm-weather regions year-round but adjust your marketing in colder climates to align with seasonal demand. This approach can offer insight into your customers' preferred language, cultural practices, local climate, and even their daily lives, such as the population density of their town or city. Geographic segmentation groups customers by location to tailor marketing strategies to regional preferences. For example, a company that sells a music streaming service could segment its customer base according to the genres customers listen to, the times of day they typically listen, and the devices they use to stream music. Customer segmentation allows businesses to use targeted messaging, rather than taking a one-size-fits-all approach, to drive business results.

Avoid creating too many customer segments, which can fragment your efforts and dilute your resources. This data can include demographics, psychographics, purchase behavior, geographic location, and other pertinent information. Customer segmentation is a strategic approach to understanding and categorizing your customer base.

Try Shopify for free, and explore all the tools you need to start, run, and grow your business. It is used to help companies better target their products and services to the right people. Repeat this market segmentation process for customer segmentation using Shopify's segmentation tools to stay ahead of the curve. Remember, market segmentation isn't a one-off activity, as consumer preferences change and new competitors emerge. Divide your customer base into the same variables you used to define the niche market.

• Customer segmentation is popular because it helps you identify new products and services to create next, as well as how to market and sell existing offerings more effectively.
• In the business world, grouping customers—or customer segmentation—offers valuable insight that allows you to customize your customer experience and build relationships with buyers.
• This approach can offer insight into your customers' preferred language, cultural practices, local climate, and even their daily lives, such as the population density of their town or city.

In marketing, market segmentation or customer segmentation is the process of dividing a consumer or business market into meaningful sub-groups of current or potential customers, known as segments. It may include hallucinated information, copyright violations, claims not verified in cited sources, original research, or fictitious references. Behavioral segmentation is critical to your business’ success in identifying and understanding target audiences, and tailoring your marketing strategy accordingly. These interactions can include site views, clicks, and social media activity. For example, if you sell software, you might choose to segment your customers further into more specific usage categories — for instance, heavy users versus average users versus light users.

Step #7: Implementation and monitoring

It includes keeping tabs on the channels prospects visit you through, what content they interact with and how they interact with your product. This is where lead nurturing and relationship-building come into play. This is an indicator to provide them with educational resources and simplified product offerings. By understanding different customer segments’ pain points and requirements, companies can develop targeted campaigns.

Selecting the right base requires a good deal of thought and a basic understanding of the market to be segmented. For example, a person's hair color may be a relevant base for a shampoo manufacturer, but it would not be relevant for a seller of financial services. In this step, marketers are looking for a means of achieving internal homogeneity (similarity within the segments), and external heterogeneity (differences between segments).